Key Support & Resistance (S/R) Levels:

As the Greenback continues to rally heading into the end of the year we thought it would be a good time to review a couple key S/R levels.  Traders generate S/R based on a number of factors.  One key factor is based on the tenor of the chart the trader is using.  A trader using a tick or minute chart will be less concerned about S/R generated from a 4 hour chart that is 100+ pips from the current handle.  However, that same trader will want to know where the longer term S/R levels sit. If price moves towards those points he can integrate them into his trading strategies thereby profiting and or avoiding losses.

GBP/USD:

The Cable is currently sitting below its 100 day MA which generates an already negative bias.  A candle body below 1.6198 would generate the next Short entry point  Near term profit taking would be the 200 day MA.  If the 200 day MA is breached we would target the low of this range bound period near 1.5683 which also represents the Fibonacci  38.2% Retrace level.  The 38.2% Retrace level was generated from the Sterlings turn around in January of this year.

AUD/USD:

The Aussie has shown great resilience and for good reason.  The RBA had taken a hawkish stance on rates as it was amongst the first to raise rates.  The Australian economy is in relatively good shape.  Additionally, the AUD is a commodity currency and it has ridden the commodity rally. Currently the AUD is sitting just below the 50 day MA.  A candle body appearing below .8944 equal to the Fibonacci 76.4% Retrace level, which also coincides with recent support levels would trigger a near term Short entry.  We would increase the Short position with a close below the 100 day MA, currently holding at .8834.  A long signal would be generated with a close well above near term resistance at .9325.

With the EUR taking a sharp nose dive yesterday it prompts us to look at recent relative price levels on the G-7.  The EUR/USD is the most commonly traded pair in the world.  The price of the EUR has broad implications on the relative value of other G-7 currencies.  Although the below data can be shown graphically it is easier to view price differentials in a table.  If the EUR is a leading indicator of relative  value then the CAD, AUD, and GBP may be in for a minor drop.

Historical

Date  EUR  CAD  AUD  NZD  JPY  GBP

2009-10-02 1.4576  1.0797 0.8652 0.7160  89.8050 1.5946

2009-10-01 1.4545  1.0839  0.8697  0.7149  89.6050 1.5955

2009-09-30 1.4640  1.0695  0.8828  0.7232  89.7050 1.5982

2009-09-29 1.4587  1.0846  0.8703  0.7143  90.0885 1.5961

Current

Date  EUR  CAD  AUD  NZD  JPY  GBP

2009-12-15 1.4533  1.0611 0.9067 0.7224  89.6355 1.6272